Several companies have shed business units striving to become more focused. In fact, roughly a year to two years ago, news of yet another corporate spinoff was quite common. But, as I told U.S. News & World Report a little over a year ago when they quoted me in an article about corporate spinoffs, merely increasing focus is not enough.
A recent example is HP Enterprises. Awhile back, HP split itself in two, thus allowing a narrower focus for each of the two businesses emerging from the breakup. The February 24, 2017 Wall Street Journal article “HP Enterprise Lowers Its Outlook” by Rachael King reported that “Hewlett Packard Enterprise Co. suffered its steepest drop in quarterly revenue since it split from the PC and printer business”. According to the article, HP Enterprise’s “revenue fell 10% from a year earlier as its hardware division was hit hard.”
I have been researching business success and failure patterns for over 25 years, and as I see it, greater focus alone will not drive a brighter outlook. Of course, if the mix of products and lines of business does not mesh well with a company’s strengths, greater focus may be warranted. But, when a slowdown occurs, it generally takes more than increased focus to revitalize the business, as HP Enterprise’s situation illustrates.
Companies need to think through their strategies, and in most cases, this involves far more than merely narrowing a company’s focus. A company with a relatively weak outlook due to market conditions generally won’t reverse disappointing performance merely by becoming more focused. Business success typically requires far more than that.
Yet, many companies have done spinoffs, much like HP, since greater focus is often perceived as a path to strategic success. However, as HP’s situation illustrates, when a company faces weak market conditions, greater focus won’t necessarily improve matters. Companies facing such circumstances, need to look beyond their breadth of focus and identify strategically sound ways to build their business. Merely spinning off business units and becoming more focused is generally not enough.
